Make In India and Move In India go hand-in-hand

Manufacturing and logistics are the two sides of the same coin. Any product needs to reach the buyer. The transport of products is a part of this connection between the manufacturer, distributor, and buyer. The Centre’s ambitious Make In India scheme aims to make India a global powerhouse in exports and reduce the nation’s dependence on imports. Therefore, India must make more goods in India, and as a direct result, the country needs the most robust logistics sector to make “Make in India” a success.

The logistics sector contributes almost 14.4% to the Indian GDP and employs more than eight million people across the country. The worth of India’s logistics sector currently stands at $160 billion and is expected to grow to ~$250 billion in the next few years. These are phenomenal numbers, considering the traditional logistics industry was quite unorganised until around a decade ago. It is only in recent times that the Indian logistics industry is witnessing a significant shift towards digitisation and contactless operations. The massive e-commerce boom has come at a time when the logistics industry is also in the process of reinventing itself through technology.

Today, you select a T-shirt of your choice sitting in a small town in say, Gujarat. The T-shirt, sold on the e-commerce platform, is guaranteed to be delivered to you in two days’ time. It is manufactured in a small hub in rural Punjab. As promised, it gets delivered in two days. The point here is, without a strong logistics sector, not just the booming e-commerce platform, but also the entire Make In India initiative will fail to deliver. The e-commerce sector is estimated to be worth $ 220 billion in India by 2025. The need for quality logistics for goods to be delivered to various locations speedily and in a good manner will only increase. Growth in e-commerce, to massive proportions, will only spur growth in the logistics sector.

This is largely because on the demand side, several industry stakeholders that traditionally operated offline went online, and there has been a huge explosion of Direct-to-consume (D2C) brands seeking to bring the very best of ‘Made in India’ products directly to the customer’s doorstep. 

Under the Centre’s Make in India initiative, there have been some unprecedented changes from the policy and regulatory perspective. For instance, the Indian logistics industry had no nodal agency to go to. For issues related to road transport, we had to approach the Ministry of Road Transport and Highways. Similarly, we had to go to the Ministry of Civil Aviation for air cargo-related issues, and to the Finance or the Commerce Ministry for service tax-related problems.

The Centre has now created a logistics division under the Commerce Ministry with a single agenda of lowering logistics costs. A senior IAS officer has been appointed in charge. This is the key because, in an industry that is unorganised and fragmented, regulation is important to bring about standardisation, which in turn will lower the costs.

MAKE IN INDIA IMPACT

‘Make In India’ initiative has brought taxation benefits too. For instance, there has been a reduction in delivery expenses by 12-15%, thereby lowering the final price of the goods. There has now been a shift of focus from saving taxes to increasing efficiencies.

Progress in third-party logistics is also being witnessed because of the input tax credit mechanism. Because the interstate tax has become neutral, it has enabled large warehouses to be established at key strategic locations along with a few regional hubs. Because of these factors, logistics is witnessing an uptick, even in the aftermath of the Covid-19 pandemic, as the focus is progressively on the entire supply chain of doorstep delivery.

The logistics industry’s health depends on factors such as higher growth in GDP, the e-commerce boom, and growing exports that will increase demand for efficient logistics services. Logistics players have seen an opportunity and have solidified the supply chain to bridge the gap in this fragmented and unorganised industry. 

It is clear that infrastructure readiness and technology are the key drivers of growth for the Indian logistics industry. With government support, and stress on schemes such as Make in India, every trend that will drive this growth will involve the adoption of technology for tactical and operational decision making, whether it is for routing, fleet optimisation, data analysis, or strategic.

The government realises that improving the logistics infrastructure and providing cost-effective logistics is an important aspect in achieving the aims of the ambitious Make in India scheme. There is a vision of making India the manufacturing hub of the world, and for that, the base of the support mechanism is the logistics infrastructure. A strong supply chain infrastructure will directly result in improved ease of doing business, which will make the country a lucrative destination for manufacturing.

What we need are integrated zones where logistics and manufacturing players co-exist and work together without worrying about geographical factors. Recently, CONCOR announced its intention to set up Multi-Modal Logistic Parks all over the country with end-to-end solutions. A container manufacturing facility will come up in Kadapa soon, for which groundwork is being done. Such a model will allow manufacturers and logistics companies to work closely and improve the overall economic prosperity of the country.

Author: Nilesh Ghule, Co-Founder and CEO, TruckBhejo

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